In recent years I've been writing commentary pieces on issues in the real estate world. Doing so, I've been finding myself engaged not only with descriptions of trends in our fascinating sector but also with the factors that drive these trends.
Follow Israel Hayom on Facebook and Twitter
In the Israeli real estate world, one of the factors behind the market's high demand – if not the factor – is without a doubt the country's population growth, or rather, its overpopulation, now just beginning to be felt.
I decided to dig deeper in anticipation of Israel's 73rd Independence Day – the date the government chose to observe and celebrate the growth of the country's population.
More than 9.3 million residents
Let's begin with the raw data. As of the end of February 2021, the population of Israel numbered 9.313 million. Yes, you read that correctly – we passed the 9-million mark on the eve of Rosh Hashanah 5781, in September 2009 – a year and a half ago, and here we are, already past 9.3 million. The country is forecast to reach the 10-million threshold no later than 2024.
Data collected by the Central Bureau of Statistics (CBS) shows that in 2020, the Israeli population grew by about 151,000 – an annual rate of 1.7%.
Most of the growth (84%) was due to natural population increase; the rest (16%) reflects the international migration balance. In 2020, about 176,000 children were born, about 20,000 new immigrants arrived in the country based on the Law of Return, and about 11,000 immigrant-citizens arrived based on the Entry into Israel Law. At the same time, the CBS recorded about 50,000 deaths and about 6,000 Israelis who had been living abroad for over a year.
In 2019, Israel had about 2.14 million families, compared to 1.8 million a decade ago, in 2010. The average Israeli family numbers 3.72 members, a figure that has not changed over the past decade. About half of Israeli families include two parents and at least one child under 17.
Demographic news
CBS data also show that in 2019, the fertility rate in Israel was about 3.1 children per woman – the highest rate in the OECD. The Israeli birthrate is exceptional not only in its magnitude, but also in its norms, which encourage citizens to have children across population sectors, education levels, and religious affiliations. The rise in the fertility rate occurred in tandem with the rise in the age of first-time mothers and the rise in women's education levels, at least in the Jewish population.
The ramifications are stunning. Contrary to global trends, with the rise in women's age at first marriage correlated with more years of education and lower fertility, in Israel, we see the opposite trend. Though women marry later, are more educated, and give birth at a later age, fertility and birth rates are on the rise.
There are also good news on the other end of life's spectrum. Israel's average life expectancy in 2020 was around 83 – sixth in the world.
The growth of the country's population over the years is no less than fantastic. Some would say it's a miracle that happened to the Jewish people, which, though beaten and downtrodden, arose like a phoenix after the Holocaust and is now growing and prospering at an incredible pace.
In 1948, Israel's population was 806,000; on its 25th anniversary, on Independence Day in 1973, it was 3.33 million; 25 years later, in 1998, it was 6.04 million; and today, celebrating Israel's 73rd year, our population is 9.31 million strong. If you think this growth engine is about to stall, you've got it completely wrong.
Israel's cities are growing
The result of the population growth is that Israel's cities are also growing. Some, such as Jerusalem and Tel Aviv-Jaffa, are already considered large cities on an international scale.
According to CBS data, as of late 2019 Israel had no less than 16 cities numbering over 100,000 residents: Jerusalem (936,047), Tel Aviv-Jaffa (461,352), Haifa (285,542), Rishon LeZion (254,238), Petah Tikva (248,005), Ashdod (225,828), Netanya (221,850), Beersheba (209,683), Bnei Brak (204,616), Holon (195,696), Ramat Gan (163,301), Ashkelon (144,153), Rehovot (143,912), Bat Yam (128,742), Beit Shemesh (124,797), and Kfar Saba (101,595). About to cross the 100,000 threshold are Herzliya (97,587), Hadera (97,199) and Modi'in-Maccabim-Re'ut (93,266).
The numbers are mind-boggling. Cities that we were accustomed to seeing as relatively small and intimate, and which are still perceived and positioned as such, have been blooming in recent years and are growing at a fast pace.
Notably, a city with over 200,000 residents is considered large on an international scale as well. As of late 2019, Israel had 9 such cities.
2065 – 20 million residents
All this data is just a promo for Israel's forecasted population in the coming years – and this is the truly big news. All we've been seeing in terms of population growth in recent years will be nothing compared to what's to come in the next decades.
The population is expected to grow exponentially – a concept we've become familiar with over the past year's pandemic. This means that the growth is relatively small at first, gaining momentum as it continues and then exploding. This is exactly the situation in which Israel now finds itself in the field of population growth.
At an average annual growth rate of 1.7%, in the coming decades, we'll be seeing exponential growth in the country's population. The CBS forecasts that Israel's population, now numbering 9.3 million, will reach 10 million by late 2024, 15 million by 2048, and 20 million by the end of 2065. At the end of 2015, the number of children 14 and under was 2.4 million. This number is expected to rise to 3.7 million by 2040 and 5.5 million by 2065.
At the end of 2015, the number of working-age residents in their prime (aged 25-64) was 3.9 million. That number is expected to reach about 5.6 million by the end of 2040 and 8.3 million by the end of 2065.
In late 2015, the over-65 population numbered 939,000. It is expected to number 1.9 million by late 2040 and 3 million by late 2065.
These numbers are no less than amazing. "The engine of the Israeli economy" has been a subject of discussion for years. In the distant past that engine was orchards; in the more recent past and in the present, it is the hi-tech industry. But in fact, the engine of Israel and the Israeli economy is the Israeli womb, responsible for bearing and raising the next generations of start-up leaders, programmers, engineers, and entrepreneurs.
What does all this have to do with real estate?
Now, let's connect the dots – the data on Israel's population growth and the real estate conditions we're experiencing today. Anyone who's ever studied economy knows the first lesson explains the concepts of supply and demand. This is the basis of the entire world economy.
For prices to become balanced, the supply and demand curves must converge. This column has been dedicated to one side of the equation – the demand curve. We can see that demand for houses in Israel is almost infinite. There is no scenario where demand will fall or fade – it only grows higher as the years go by.
Demand can be lowered artificially for a certain period, but will bounce back, since, like it or not, every person, family, and household need a roof over their heads. This is the most basic human need, alongside air, water, and food. Almost any other need can be postponed, but without a roof over one's head there is no life – certainly not a life that can be considered worthy and dignified.
On the other side is the supply curve. This time, we didn't take an in-depth look at the supply side, which reflects the rate of housing supply needed to balance demand, so that an average Israeli family can buy an apartment at an affordable price.
Subscribe to Israel Hayom's daily newsletter and never miss our top stories!
Suffice it to say that according to the model developed by Prof. Zvi Eckstein – the best and most professional real estate price forecaster in Israel – in order to fulfill demand, Israel must build 60,000 apartments each year and continually. In addition, it needs to build another 20,000 apartments per year in the next decade to mitigate the existing shortage.
In reality, the pace of housing starts in Israel is only around 50,000 apartments. Furthermore, the planning processes are cumbersome and long-drawn-out. The process of producing an apartment includes: performing a feasibility study and submitting a plan to the district committee (six years), preparing a development plan and publishing a marketing tender (two to four years), discussions at the local building committee and obtaining building permits (three years), and the actual construction (three years). In total, producing an apartment in Israel takes between 14 and 16 years.
What this means is that today's planning must look to the future, straight into the middle of the next decade. Does Israel have such a long-term planning policy? In my humble opinion, the answer is no.
Looking towards the future
This is where it all comes together. Demand is high and becoming constantly higher. The supply is low and insufficient. The result is that, on the eve of Israel's 73rd Independence Day, an investment in real estate is very likely to be a good and solid one.
When we look to the future – and forget for a moment the daily buzz of news and the flow of data – we see that an apartment is a commodity hard to come by even today, and the situation will only get worse.
Israel's future is rosy. The country will continue to grow and prosper, and in my opinion, investing in an apartment at this time will lead to personal-economic independence and will add variety to the investment portfolio of those saving for their pensions and old age.
On a personal note, I'm proud to be working in the real estate sector. We are the ones placing a roof over the heads of this country's people, and the ones struggling to realize the projects that will supply a home to its future residents; we are the ones who aspire, uncompromisingly, to fulfill this most basic need in the lives of the Israeli public.
In our days, in the year 2021, working in the construction and real estate sector is no less than modern Zionism. It is a badge of honor for all those working in the field.
I'll take this opportunity to wish the readers a happy Independence Day and happy holidays. May we be blessed with an abundance of building projects, and may the State of Israel rise to the challenge of its own growth with perspicacity, wisdom, and good judgment.
Asaf Kahaner is head of the Marketing Division at Ewave Nadlan
This article might include sponsored and commercial content/marketing information. Israel Hayom is not responsible for its nature or its credibility. The publication of such content or information shall not be considered a recommendation and/or an offer by Israel Hayom to purchase and/or use the services or products mentioned in this article.
